Previous Research LITERATURE REVIEW

important component of working capital related to inventories, accounts receivables and accounts payables Ross, 2002. Financial executives have to make different decisions about the level of these components in order to the best results. The dynamic nature of short-term business emporium, the daily need to substituting current assets, and current liquidation liabilities help to clarify the importance of working capital management and financial executive duties. The direct effect of working capital management on profitability and liquidity position of firms also refers the importance of working capital management Nobanee, Abdullatif, Al Hajjar in Mansori, 2012. Research by Gama 2012 found that one of the utmost important components of working capital which is the number of days accounts receivable is a positive effect on profitability. This contrast with research conducted by Garcia 2006 who found results that the number of days accounts receivable has no effect on the profitability. According to Widhiarso, The more variables are controlled, the research we are doing more qualified. Of course, not all variables can be included in the control variables. Terms of the control variables are variables other than the independent variable that influences the dependent variable are based on a researcher who did with their researchers. In addition, sales growth [this year’s sales – previous year’s sales]previous year’s sales, and the leverage financial debttotal assets are included as control variables in the regressions that have been conducted by Deloof 2003, Garcia 2007 and Gama 2012. Based on the description above, can be made framework that describes the relationship between the working capital management with profitability that shown in the following figure: Figure 1. Conceptual Framework Figure 1 before shows the relationship variables examined in this research, which this figure can be seen that the researchers will examine the effect of independent variables AR, INV, CAR, and CLR and control variable SGROW, and DEBT on the dependent variable ROA. • The Sales Growth SGROW • Leverage DEBT Independent Variable Control Variable Working Capital: • Current Assets Ratio CAR • Current Liabilities Ratio CLR Working Capital Management: • The number of days Accounts Receivable AR • The number of days Inventories INV Dependent Variable Return on Asset ROA

2.4 Hypothesis

Based on the relationship between aims of the research as well as theoretical, conceptual framework against channeling research problem formulation, then the hypothesis proposed is as follows: 1. H : The number of days accounts receivable, the number of days inventories, current asset, current liabilities, the sales growth, and leverage do not have the significant effect on the profitability of the company return on asset. 2. H a :The number of days account receivable, the number of days inventories, current asset, current liabilities, the sales growth, and leverage have the significant effect on the profitability of the company return on asset.